Attack or help with regulatory dumping for borrowers? All in all, of course, it helps because by regulating the borrowing and the terms and conditions of borrowing, it prevents potential customers from making an early decision and not having to learn the basic rules of borrowing at their own expense.
Borrowing is a complex thing
It can be useful, but you have to make rational decisions. Not everyone is capable of doing so, because sometimes our desires or despair can affect our common sense.
In such cases, risks are not weighed as they should. Caution must be exercised when making decisions. Those who have been paying off their car loans for a long time know that the outstanding debt may be higher than the car’s current market value, which is a high financing ratio compared to the value of the car.
Mainly the case with long-term loans
Generally, people choose a longer maturity because there is less installment payment, which means that if the maturity is shorter, the maturity is much higher. For lower-income, it is, therefore, a better decision to choose a longer maturity.
Unfortunately, the value of the vehicles you buy, even on the day you own it, is worthless and it is declining. And for new cars, this is an even faster process, unfortunately drastically depreciating as much as 30% in the first year.
As far as loan repayment is concerned
It is also good to know that if you choose a monthly fixed repayment, you will first pay more interest in the first half of the repayment because the bank will charge interest on the larger amount of capital.
Therefore, it is very difficult to reduce the borrowed amount in the beginning. Previously, a car could be bought with up to 100% credit. In these cases, a new car purchased for a 10-year term is worth only half of the purchase price in the third year, but the debt is still about 80 percent of the loan.
We, as the owner, have to supplement the 30 percent difference if we want to divest the car, that is, sell it, or if the leasing company takes the vehicle back from us for resale because of our repayment difficulties.